Mark Brugger, the President and Chief Executive Officer of Diamondrock Hospitality, spoke about how Marriott’s new loyalty program is affecting his hotels during the company’s earnings call held on May 9.
Diamondrock is a large owner of Marriott hotels across 8 of their brands including the Vail Marriott, Renaissance Charleston, and Frenchman’s Reef & Morning Star Marriott Beach Resort.
Marriott St. Thomas, Credit: Marriott
When asked by analysts to provide color on the Bonvoy transition, he noted lower costs and some positives and negatives depending on the property but where he zeroed in on a problem it’s providing breakfast at resorts to elites (“the leads who are their premium folks”) and he suggests breakfast is too expensive to provide for the compensation his hotels receive from the chain.
Brugger says Marriott is working with them on this, though doesn’t share whether that means cutting back on breakfast or raising compensation. Here is how the program currently approaches elite breakfast.
So on the Bonvoy and rewards program, they’ve made some changes and like you would expect when they were on new programs, for some of their hotels, it’s been really good and some we need to make adjustments with the new program.
So, I would say, our rewards cost in Bonvoy are down across our system, which has been good. Some of the contributions in some hotels are up and frankly some are down. And so, we’re working with them and they are agreeable to make adjustments where it’s fair to make adjustments. I’d say the one that we’re — we have been a little bit focused on is they — what — on your Bonvoy, they’ve given the leads who are their premium folks, free breakfast at resorts and they compensate us I think $7 a breakfast. But that’s one that in some markets make sense and in some markets probably is it’s too expensive. So that would be one that under the Bonvoy program we’re working with them on solutions to be equitable.
Breakfast at the Scrub Island Resort, Autograph Collection
He acknowledges “rewards cost in Bonvoy are down across our system.” Before the new combined program launched in August 2018, before it became Bonvoy in February 2019, Marriott’s CEO Arne Sorenson explained that the new program would be all about lower costs for owners.
Spending less on loyalty helps explain where Marriott is today with an inadequate investment in customer service and devalued points.
What is it that these owners and hotel brands don’t understand? I spent 125 nights a year in their hotels. Most of those nights are business and I can expense meals and drinks. When I decided to take my wife somewhere be it a resort or just a weekend in the city I expect my loyalty to be recognized and rewarded. Giving us a free breakfast when I’m traveling on my own dime with my wife isn’t breaking the bottom line. It keeps me loyal and they get my business down the line.
Yah, but the issue is that you are spending your business travel dollars at one property (or several) and then looking to take advantage of the free breakfast at another property, which is most likely owned by a different entity. It is up to Marriott to ensure that hotels are compensated adequately for the benefit – they are the ones who have the incentive to keep high spend elites happy.
I don’t see the merit in the operator’s complaint. Overall costs of the program are down for him; it sounds as if Marriott has shifted the distribution of those costs.
Does he think generating leads for his business is free? There’s a reason the elites chose his hotel in the first place…
And yet – NEVER a problem with the Starwood Hotels at ANY Brand
To @FNT Delta Diamond: just a caution not to confuse the hotel owners with the brand and management. The guy who owns the desirable resort that you want to enjoy with your wife is not seeing the revenue from your business trips and correlating expenses. I’m not dismissing your broader point, but it seems that the Marriott might need to up their reimbursement to their owners to keep them happy and to keep the benefits flowing.
$7 compensation seems like more than enough to cover straight COGS for even a quite good breakfast in an expensive market. Unless his argument is that the elite breakfast is cannibalizing otherwise paid breakfasts at some significant rate (my hypothesis: most elites aren’t gonna spend ~$30 for a Marriott buffet breakfast when traveling on leisure), then I don’t see the merit here. Nice try though.
@BC, so “The guy who owns the desirable resort” just get all the juice w/o spending anything? Why would FNT Delta Diamond even go to his resort in the 1st place? shouldn’t he be paying something, even under the agreement?
There is a reason that property owners chose their flags primary being attracting built in business and the assumptions they can make in the prospectus for financing and investors. A Marriott flag is worth more to an investor to say a Motel 6 chain that’s just a fact.
Along with selection of flag is an owners agreement to ALL THE TERMS AND CONDITIONS contained within, I repeat ALL. In todays world of “equity capital” investment yields management always look to the low lying fruit in this case breakfast. what doesn’t surprise anyone here?
At the end of the day its the consumer that holds the upper hand. I speak to this as having been deeply involved in hotel ownership at one time.
@BC, while that property owner might not see the revenue from business trips, his property is more attractive to potentially high-spending business travelers because of the affiliation with Marriott and the benefits that are promised Marriott loyalists at all flag properties. He’s getting the lead gen and the built-in traffic that comes from being part of the brand; traditionally the other side of the equation is that he treats Marriott’s best customers overall as his best customers even though they might only visit him once or twice. If you don’t buy into this theory, there’s really no reason then for you to pay to be a part of a brand, and you might as well just stand alone.
@CW I agree with you that $7 probably ought to cover the breakfast cost or at least come real close, so his complaint must be that it’s eating into his breakfast business overall. Depending on the property, that might be true — I don’t think there’s an easy alternative to breakfast in a place like St Thomas given that location, so maybe it is eating into his margins. If I can walk to another breakfast place on a leisure trip, I won’t pay the inflated hotel price. On a business trip I’m much more likely to partake in whatever the hotel has, for efficiency’s sake.
I’m an Ambassador level member with 1,376 lifetime nights over 16 years….
A few thoughts:
1) @Lu – You hit the nail on the head! Non-US properties treat elites MUCH better. They understand branding and requirements much better. I never have to worry about “continental” breakfast at say the Sheraton Amsterdam Airport, or the Westin Vendome Paris or the Marriott Istanbul Sisli. But when I stay at US properties -be they Sheraton, Westin, Courtyard, or Marriott – one just never knows what to expect – lounge or not.
2) Former Starwood branded hotels seem to “get” the new Bonvoy program better than Marriott International brands.
3) IF they truly value the upper elite levels – Titanium & Ambassador – then maybe offer these levels a more complete breakfast. Starting this year, Ambassador level requires BOTH 100 nights AND $20,000 spend. The spend is based on room rates only – not parking, resort fees, taxes, etc. If a member can make that requirement, as well as having an Ambassador (who is restricted to what they can do for a member since Bonvoy), and Your24 – then they should also have a more substantial breakfast allowance. Giving someone who spends upwards of $20,000/year and 100+ nights at Marriott Intl a box with a dry croissant and fruit is truly embarrassing….and disrespectful.
4) Having stayed at a Four Points by Sheraton recently (last week) I noticed signage was still SPG. I asked the Front Office manager about this and she said – the Bonvoy signage (welcome mats, etc) are very expensive and the hotel owner doesn’t want to invest in it. REALLY ???
Am I the only person who sleeps in, or has to leave early and doesn’t want breakfast in a hotel? I am Titanium Elite, and I would rather a straight hotel credit than trying to force me to wake up early to enjoy what I have earned… I want water in the rooms, an upgrade, and attention to my needs if I were to have them on property… Breakfast is the least of my worries.
Get off the loyalty train if you’re not being reimbursed for business purposes…. is the only answer.
The hotel is part of Marriott and free breakfasts are part of doing business. Given that I would never eat breakfast at a full service Marriott due to the cost and most of the time restaurants are pretty much empty at breakfast, maybe keeping it open has a high labor cost for the few people who actually pay the $25-35 for breakfast. If the restaurant has high fixed costs, $7 is not helpful to the bottom line. But that is the cost of being part of the Marriott chain. I pick Marriott as a Titanium Lifetime Elite with over 1200 nights so I can get a free breakfast. I like upgrades but it is not my main focus. I like a nice lounge with free food and drinks. At the Sheraton Tribeca, I booked two rooms, one was upgraded to a junior suite, free wine in the club and nice amount of food for breakfast and a light dinner. Or I could have stayed at another hotel with free breakfast. Without the titanium benefits, I would not stay at a good number of the Marriotts in the USA.
If Mark Brugger does not like the new Bonvoy he can certainly re-flag some of his properties as
1) Hyatt
2) Hilton Brand
but both still require providing elites with breakfast benefits.
3) IHG would be the logical choice because of minuscule elite benefits on award stays.
4) Or go independent – no franchise fees at all!
At the end, loyalty schemes and benefits are subject to competition the same way any other business is.
Andy, I have been a Marriott Rewards member since the inception early 80’s I have as of today 4431 room nights and never have I seen a decline in service and quality as I have in the past year. My company deals with many of the companies that own various Marriott flags as well as others and can tell you first hand that Hyatt for one does not allow the deterioration of properties and more importantly service like Marriott has of late, understanding that the Marriott family is gone it’s all Host International and investors as well as “door count”.
It’s a joke that an executive of large company blames breakfast on declining profits really? Breakfast in the industry is the cheapest meal of the day and the most profitable. To say he is losing money in this benefit is BS simply BS. The nice thing is one can go to their website find their properties and then avoid them simple as that, to which I will.
They are not losing money when they have to provide a breakfast for $7.00, they are losing profits because they have so much profit built into to their inflated breakfast prices…
Their either Marriott, or their not. Quit putting the customer in the middle and get your s#(& together, or continue to have people rebrand their loyalty. Because that’s what’s happening now.
I as a customer could care less about Marriott’s reimbursement to their franchisee. The property I assume has control of their rates. If they feel they aren’t mailing enough profit they can try raising the rates. I for one never book a Marriott property if a nearby Hilton is price competitive. I’ve been a Hilton Diamond for about 8 years and really like to brand and their free breakfast.
The law of large numbers can really hurt Marriott if they charge for breakfasts for elites.
@ghostrider5408 – Jeez! 4431 total nights at Marriott??
Do you ever go home?
@Joelfreak
I am with you. I travel for work during the week and have no time for a leisurely breakfast (or I just expense it if I am really hungry).
If I am at a hotel during the weekend, the last thing I want to do is wake up early to eat powdered eggs and who knows what sausage. I’d rather get some more sleep and enjoy brunch with a proper drink.
Poor baby. If he can’t cover the cost for a simple breakfast with his ridiculous $30 “resort fees” maybe he should affiliate with a different chain like Wyndham. Zero sympathy for hotel owners who want to reap all the benefits of a “loyalty” program but assume none of the costs.
When I got Ritz Carlton card it came with Marriott gold which included breakfast and exec lounge access at most Marriott brands. Since merger Gold does not get you either. I used to look at Marriott first, but now look last, if at all. They have to be kidding. Unless their hotels are at 100% they are losing money by the change, at least from me. The down grade of Gold is bad business and I may give up on Ritz Carlton card.
How many elites even get free breakfast? Isn’t it only Plats and above?
I don’t think that’s a huge group of guests. Many more folks qualify for free breakfast at Hilton.
I guess I can see Brugger’s point that 7 bucks is on the low side of compensation for serving a guest breakfast at a high-end property, But it’s not that low. I guess he can negotiate hard for 8 or 9 bucks.
So costs are lower, which doubtless comes via customer service cutbacks since Marriott certainly isn’t going to incur any pain on their part. Despite this, the owner whines that the customer isn’t getting shorted enough for his satisfaction. That’s pretty pathetic. Bonvoy is literally a byword for screwing over customers and this guy wants it to become worse?
If I received that breakfast for free every morning on Scrub Island I would be happy. If my wife got one too, I would be extremely pleased because she doesn’t eat breakfast. That’s probably breakfast and lunch for both of us and then we’d take the ferry to Tortola and splurge on a big dinner. I don’t understand what all the complaining is about. It’s free.
Something that needs to be pointed out is the Frenchman’s reef is a leisure property that doesn’t see a lot of direct business stays. They are competing on leisure amenities and beach access. Does it benefit from the rewards program and Marriott members booking the hotel to get points in the program, yes. Do members who earn platinum and titanium elite in lower cost business hotels and who use status to get suite upgrades from cheaper paid rooms at the frenchman’s Reef benefit the hotel, not really. The type of people who aren’t going to spend money for leisurely breakfast for two on vacation aren’t the type of people that benefit this type of hotel.
Totally agree – I have now stayed in 2 Hyatts when before would have been in Marriott. Who get’s the last laugh!
@FNT Delta Diamond
As I understand your comment you are expecting to be recognized and treated well for your employer’s substantial spend. Perhaps you should just spend some of your money and let programs evolve to reward the real paying party. While it might take a while to happen, it seems like a likely path. I can expect a program which will reward or rebate firms base don their spend. The basis is already in place, you do know that many firms have preferred partners and that is set up for rebates or discounts. The next step is to eliminate points or miles for that travel.
Typical Marriott company/franchisee BS. I avoid Marriott like the plague. Have done so for a long time.
Ah yes, business would be so much simpler were it not for those pesky customers….
I was just at scrub island and that is not the free breakfast for elites. It might have been at the beginning of the transition but now you have an option between free continental, free American breakfast with eggs, toast, bacon, potatoes and coffee/juice, free waffles, free pancakes or 50% off any other entree. It was a very good value. I think the picture should be removed as it is deceiving and scrub island made the corrections needed.
At $7 there is definitely a profit being made on the pictured breakfast unless is being canoed in. To be fair there probably is some labor involved to remove the plastic packing as well.
Just seems as though Marriott is not taking care of their elites unless they are way up in the system. Pretty short sighted and sorry way to run a company. Staying in Hilton instead of Marriott for my next trip.We can’t be the only ones!